Multifamily Investment - Market Update EMEA Living Research Summer 2019 - JLL
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
European Multifamily Investment Market Update EMEA Living Research Summer 2019
European Multifamily Investment | Market Update | 2019
Contents
Multifamily investment overview 3
City investment volumes 4
European market overview 5
Looking ahead 6
Cross-border activity 8
Country Profiles
Denmark 10
Finland 12
France 14
Germany 16
Ireland 18
Netherlands 20
Poland 22
Spain 24
Sweden 26
United Kingdom 28
Emerging multifamily markets 30
2
European Multifamily Investment | Market Update | 2019
Introduction
The third annual JLL European multifamily investment report reinforces the position of residential as the biggest growth
opportunity for institutional capital in Europe. This report demonstrates just how powerful the pivot in capital allocations
has now become and legitimises the strategies of early pioneers that led this new wave of residential investment.
The great beneficiaries, of course, are communities right across Europe that are seeing new investment in high quality homes
and ever more intelligent technology that is shaping quality of life. Europe’s great cities are grappling with an overwhelming
challenge of surging demand and inadequate supply. Urbanisation, population growth and longer lifespans are some of the
drivers that will continue to support investment returns.
The growing momentum behind ESG investment activity will be a further catalyst. It is not enough to see more homes built;
they need to be the right homes and affordable to more people. JLL is deeply committed to supporting the market and
housing industry to create the right homes that Europe’s urban populations so badly need.
Andrew Frost
Head of EMEA Living
€0.2
Market size €1.8
bn
by country bn
€1.0
2018 Investment Volumes (€bn)* bn
€3.6
bn
€4.3
bn
€18.6
bn
€4.4
€56bn
bn
€4.9
bn
€6.8
€5.1 bn
bn
€5.6
bn
■ Germany ■ United Kingdom ■ Netherlands ■ Sweden
■ Denmark ■ Spain ■ France ■ Austria
■ Finland ■ Ireland ■ Poland
*totals include institutional investment above €5mn, including M&A and development activity 3
European Multifamily Investment | Market Update | 2019
City investment
volumes (2018) 19
Top 20 cities (€mn)*
2
14 8
1
12
5
13
3 6
9
7 18
20
1 Berlin
€3,110mn 11 Manchester
€715mn 10
2 Copenhagen
12 Düsseldorf 15
€2,430mn €710mn
11
3 Paris
€2,240mn 13 Munich
€590mn
4 London
€2,030mn 14 Amsterdam
€450mn 16 4
5 Frankfurt am Main
€1,270mn 15 Leeds
€400mn 17
6 Vienna
€1,240mn 16 Birmingham
€330mn
7 Madrid
€1,090mn 17 Brighton
€325mn
8 Hamburg
€960mn 18 Barcelona
€270mn
9 Ile-de-France (ex. Paris)
€910mn 19 Stockholm
€270mn
10 Dublin
€840mn 20 Glasgow
€250mn
*excludes unknown multi-location portfolio deal splits
4
European Multifamily Investment | Market Update | 2019
European market overview
Heightened activity This has increased the average deal size to over €50m for
Institutional investment in European residential continued the first time. This is over 20% higher than the average for
its trajectory of growth, with total investment rising by over the previous 5 years and is unexpected considering the
40% to €56 billion in 2018. Total levels of investment far time of the cycle but also the greater share of forward deals,
surpassed anticipated activity, with several large portfolios which has driven total investment volumes.
and corporate transactions boosting aggregate figures.
The growth of a few early stage markets, most notably the UK
Yield Stabilisation
and Spain, has driven investment volumes as both markets Following a year of significant yield compression in 2017,
consolidated their place among Europe’s largest hubs for Europe’s core cities underwent a period of yield stabilisation
residential investment. Several large portfolios transacted during 2018. Yields have remained broadly stable in prime
in both France and the Netherlands, with the €1.5bn Vesta geographies, with minimal movements in more mature
portfolio in France being the largest portfolio traded in the markets such as Germany and the Netherlands over the past
past few years. The acquistion of Buwog by Vonovia in Austria 12 months. There has been moderate yield compression in
also boosted total volumes by 170%, to €3.6bn in 2018. more nascent stage markets such as Ireland and Poland as the
overweight of capital chased relatively scarce opportunities.
Dominance of Portfolios, M&A and Mega Deals
The total share of portfolio deals and M&A activity across
Europe increased significantly year on year, with just over half
(52.9%) of investment volumes attributed to multi-asset deals
in 2018. This increased from 34.9% in 2017 and represents the
2nd largest share of total activity in the past 5 years, with only
2015 seeing a larger share of portfolio deals in that period.
YOY Growth in Residential Investment
200%
150%
100%
50%
0%
Austria
United Kingdom
Finland
Spain
France
European
Average
Ireland
Germany
Netherlands
Denmark
Sweden
Poland
-50%
5
European Multifamily Investment | Market Update | 2019
Looking ahead
JLL Market Expectations
Continuing trends from last year, growth in geographical This enlarged Living offering also provides investors with
diversification and cross-border activity is set to continue a wide range of investment opportunities with differing
this year. Joint ventures, large portfolio acquisitions and M&A risk-return profiles. Not only do these sub-sectors typically
activity will be prominent vehicles that enable investors to provide greater current returns for investors but they also
deploy capital in foreign or new investment markets. However, offer more control over rental growth, with lower rental
whilst these trends are expected to continue developing in regulation in these sub sectors. This is partially a result of
the short to medium term, several new trends are gaining shortened lease lengths, which are often less than a year, but
prevalence for the year ahead. offset by higher vacancy risk.
There are clear challenges that limit the overall growth of
The return to Europe’s core markets investment in these sub-sectors. Transparency around
Portfolio sales activity has grown significantly over the past planning and questions around the scalability of relatively
few years as investors focused on driving scale. At the same niche products such as Coliving has so far limited the range
time, core markets should feature more prominently as of investors that have been active in this space.
strategies across the real estate investment spectrum take
hold. European residential markets will retain their appeal as
Maturing market activity
defensive real estate investments for investors seeking stable
cash flow. This is particularly true given the comparatively Given 2018’s record aggregate volumes for multifamily
higher levels of technological disruption in other sectors investment in Europe, most markets are expected to see
such as Retail and Office. Residential real estate also has a see slower growth in aggregate volumes over the year
low return correlation with other sectors, offering attractive ahead. Investor demand will be constrained by a lack of
diversification benefits. suitable product coming to the market and a lack of large-
scale opportunities that have transacted in recent years.
Despite multifamily’s historical counter-cyclical performance, In contrast, the faster growing markets of Spain, United
investors are still conscious of potential exit routes for Kingdom and Ireland will continue to push ahead. These
their real estate assets. Considerably higher liquidity in markets have a high proportion of forward-funding activity
Europe’s largest residential investment hubs offer investors and the structural shift in activity towards stabilised assets
reassurance for future disposals and further strengthens will provide a fillip to investment volumes. Continued growth
the demand for assets in these locations. It is also in these will further establish these markets among Europe’s top
cities where fundamentals are strongest and continued locations for multifamily investment.
urbanisation, high levels of immigration and persisting
supply/demand imbalances are all supportive of the long-
term prospects of the sector.
Growth of other Living sub-sectors
Investors have also become more active in the wider Living
spectrum, with the growth of other Living sub-sectors such
as Student Housing, Retirement Living and Coliving providing
institutional investors with a variety of alternatives to consider.
Long term demographics support the further development of
these sub-sectors that enable investors to touch multiple age
profiles. The demand for these products will grow significantly
in the short term.
6
European Multifamily Investment | Market Update | 2019
7
European Multifamily Investment | Market Update | 2019
The growth of cross-border investment
While the share of foreign investment has remained stable, absolute levels of cross-border activity have grown by over 40% in
the past year. In comparison, cross-border volumes in commercial accounted for 62% of total volumes in 2018. Sophisticated
multifamily investors have become more adept at operating in multiple markets, particularly in markets with nuanced
differences in rental market legislation. Nascent stage markets, often with a lack of purpose-built income producing assets,
have been the greatest beneficiaries of these inward flows of capital.
Cross-Border Investment Volumes
20,000 33.90% 33.70% 35%
18,886
15,000 30%
24.50% 13,084
10,000 25%
9,032
6,990
5,000 20%
17.20%
0 15%
2015 2016 2017 2018
■ Cross-border volumes (€mn) – % of total volumes
Cross-border investment volumes by country (left) and city (right) 2018
€590
mn
€480
mn
€1, 100 €3,330
mn mn
2,000 (€mn)
€1,700
mn
1,500
1,000
€2,500
€1,900 mn
mn 500
0
€2,000
Copenhagen
London
Berlin
Vienna
Dublin
mn €2,350
mn
■ Germany ■ Denmark ■ Spain
■ Sweden ■ United Kingdom ■ Netherlands
■ Finland ■ Ireland ■ France
8
European Multifamily Investment | Market Update | 2019
Where are foreign investors targeting? Non-intraregional activity on the rise
Germany has long been a hotspot for foreign capital and the European capital has long been the greatest source of
growth of new multifamily markets has enabled investors to overseas investment. There has, however, been a noticeable
access a wider range of geographies. shift in where these investors are acquiring multifamily
assets. European investors no longer focus on multifamily
Routes to market are, however, opportunity driven with no assets in domestic or neighbouring markets, typically with
one-size-fits-all approach to deploying capital in Europe. similar market structures and legislation. Instead, they are
Overseas activity in Spain and Sweden has largely been now more active further afield on the European continent.
driven by M&A, with the latter typically dominated by Non-intraregional activity totalled €2.1bn in 2014. In 2019,
domestic institutional investors. Blackstone has been active this segment of the market surpassed €5bn and accounts
in both geographies, acquiring a majority holding in D. for nearly two thirds of cross-border activity from European
Carnegie (now Hembla AB) in Sweden (2017) and as of last investors. Most of this activity took place in Sweden (€1.7bn),
year increased its holdings in Spain-domiciled Testa. The Germany (€1.6bn) and the Netherlands (€560mn), originating
Vonovia acquisition of Victoria Park (Sweden) represented from investors domiciled in Germany, Denmark and the UK.
the largest cross-border M&A activity in the Nordics and
signalled its first foray in the region.
Cross-border investment in other markets, such as Germany,
has predominantly originated from multi-location portfolio 0.3%
9.4%
acquisitions. In 2018, this amounted to over €2bn and
represented just over 60% of total foreign investment in
Europe’s largest multifamily market. Danish pension fund
PFA, Blackstone and Covivio were among the most active
foreign investors in the market, continuing to scale their
respective residential platforms in Germany.
Single asset deals and JV deals with local developers are the
51.5%
most common entry point to the United Kingdom. Invesco,
Greystar and Realstar are examples of the former, while APG 38.8%
and Apache Capital Partners have entered the market after
sourcing local partners. However, Oxford Properties’ maiden
investment in the UK may be a signal that as the market
matures, buying into UK platforms such as Get Living could
become more frequent as a greater share of these portfolio
pipelines are built out and stabilised. ■ Europe ■ Americas
■ Global ■ Middle East
Where do these investors come from?
A greater portion of cross-border activity now originates Source of capital Percentage split Movement
from Global funds (40% increase y-o-y) and North American Europe 51.5% Flat (2%)
investors (162% increase y-o-y), while absolute foreign
volumes from European investors remains broadly stable. Americas 38.8% Up (162%)
Despite the continued growth of non-European investors,
intracontinental investment still represents most of total Global 9.4% Up (40%)
cross-border activity. This segment of investors account for
51.5% (down from 65% in 2017) of total foreign volumes. Middle East 0.3% Down (-95%)
9
European Multifamily Investment | Market Update | 2019
Denmark
Foreign investors remain the most active
Source of investment With record volumes achieved in 2017 (€5.3bn), activity in
2018 remained resilient and totalled €4.9bn for the year. The
drop off (7.5%) in activity is largely attributable to a reduction
in the number of deals that came to market above the
€100m range. Despite this, total volumes surpassed market
expectations of between €4bn and €4.5bn.
Overseas investors remained active in the multifamily
45% sector, with the share of foreign volumes remaining broadly
stable (55%) but absolute levels declined slightly year on
55% year. Heimstaden and Blackstone’s activity alone totalled
over a third of nationwide volumes in 2018. Other foreign
investors such as NIAM, Patrizia and Europa Capital acquired
multiple assets in the past 12 months, with Aberdeen
Standard making its first investment in the market. Whilst
international investors retain a preference for Copenhagen,
■ Domestic ■ Foreign
we have observed greater demand for higher yielding assets
outside of Copenhagen. This is particularly true in commuter
belt locations and other major cities in Denmark. The trend
follows the acquisition strategies that domestic institutions
have implemented over the past two years, with Koncenton,
Core Bolig and PFA Ejendomme AS among the most active
investors in these geographies.
Investment Slight decline
Volumes in activity Regional locations, outside of Copenhagen and Aarhus, were
the greatest beneficiaries of this trend. The share of activity
€4.9bn (-7.5%) that is not attributable to these locations or nationwide
portfolios grew to over 30% in 2018, up from 19% in 2017 and
above the 5-year average of 15%. Meanwhile, Copenhagen
Bi-annual investment volumes (€mn) continued to represent the greatest share of geographical
activity, with just under 50% of activity originating from
3,000 assets in the wider Capital region.
2,500
2,000
1,500
1, 000
500
0
H1 H2 H1 H2 H1 H2 H1 H2 H1 H2
2014 2015 2016 2017 2018
10Spotlight on Denmark
Our expectations
Helle Ziersen
Partner & Director, EDC
Volumes: Yields:
Slight decline Stable
What is your keyword for the market in the short term?
Legislation
Why?
There is a strong sense of political debate currently in Denmark. This centres
primarily around solutions to housing delivery, which cannot keep up with levels of
demand. With rents and capital values rising significantly over the past decade there
is a clear mismatch in terms of what tenants and prospective homeowners can afford
and what type of product is being produced. This is particularly true in Copenhagen
where developers have had to build, on average, new apartments of 95 sqm.
There is clear demand for smaller properties and it will be interesting to observe
how this debate between national and local legislators will end. The direct
implications for multifamily and other Living sub-sectors focuses around micro
living units and Coliving, two forms of housing solution that have become more
popular in the rest of Europe.
What is the immediate outlook for the market?
Following a year of strong performance in 2018, investment volumes are expected
to remain stable in the year ahead. Demand for multifamily investment remains
extremely high from both domestic and foreign investors. Domestic pension
funds have recently increased their target allocation towards real estate from
c5% to between 10% and 15%. This is likely to boost demand for multifamily given
the proportion of total activity that it currently represents in Denmark and also
given historical levels of performance in the sector. We also expect continued
demand from overseas investors, namely from Scandinavia, adding to new interest
from other European investors.
The immediate concern is about the availability of suitable product coming
to the market in the short term as many large portfolios have transacted
in previous years. In the longer term however, there are clear acquisition
opportunities, with several domestic funds coming to the end of their
life-cycle and considering exit opportunities.
What significant changes do you expect to see?
As things stand, foreign investor activity can be attributed to just a few market
players. We expect this dynamic to change and anticipate that more foreign investors
will enter the market in the near future, which will increase competition for core
assets. As international investors typically prefer low-complexity assets, we expect
heightened competition in the development market, particularly in Copenhagen,
with more aggressive underwriting of rental levels and yields.
11European Multifamily Investment | Market Update | 2019
Finland
The multifamily market in Finland sees strong year-on-year growth
in investment, with large international investors increasingly active
Source of investment Total investment grew by over 70% in 2018, largely fuelled
by heightened activity from overseas investors. Transaction
volume in 2018 for residential assets was €1.8 billion, which is
the second-highest total achieved, after € 2.8 billion in 2016.
International capital has primarily targeted opportunities
in the Helsinki Metropolitan Area, with Helsinki accounting
for 57% of volumes over the past decade. However, 2018
39% represented the first year in which foreign private funds
became increasingly interested in secondary locations and
61% assets. Helsinki’s share of total activity fell from 63% in
2017 to 43% in 2018 as investors have become increasingly
opportunity driven and sought out higher yielding assets
in regional locations. Investor interest has also increasingly
turned to other large university cities where the demand for
private rental accommodation is high. These include, among
■ Domestic ■ Foreign
others, Turku, Tampere, Oulu and Jyväskylä.
Morgan Stanley, Aberdeen Standard and Round Hill Capital
all entered the market in 2018, with the latter acquiring a
nationwide residential portfolio comprised of over 3,200
units from Avant Capital Partners. This spur in activity
has changed the balance between domestic and foreign
Investment Investment volumes capital in Finland, with foreign investors accounting for 61%
volumes increased by over of volumes in 2018, compared with an average of 13% in
2015-2017.
€1.8bn 70%
The absolute share of development activity remained high,
despite several large nationwide portfolios coming to the
Bi-annual investment volumes (€mn) market in 2018. This activity is focused primarily around
Helsinki and its surrounding locations, as demand for rental
1500 accommodation grows in the capital. Continuing levels of high
internal migration and increased urbanisation ensures that
1200 this trend is likely to continue unabated in the near future.
900
600
300 NA NA
0
H1 H2 H1 H2 H1 H2 H1 H2
2015 2016 2017 2018
12Spotlight on Finland
Our expectations
Tero Uusitalo
Director – Capital Markets, Finland
Volumes: Yields:
Slight increase Stable
What is your keyword for the market in the short term?
Strong demand for multifamily.
Why?
2018 represented a change of paradigm in the multifamily market in Finland.
Activity shifted significantly towards the domain of international investors and
early signs indicate that this trend is going to continue.
European investors, most notably UK and German institutions, are particularly
aggressive in the market. We have already seen BVK and DWS acquire portfolios in
2019. International investors tend to be more active in acquiring income producing
opportunities and with several large ticket nationwide portfolios coming to the
market this year. As a result, the share of foreign volumes is expected to remain high.
Appetite for portfolios with significant exposure to Helsinki and other major cities has
grown but international investors are no longer solely focused on these geographies.
We also expect new investors to make their first investments in the Finnish
multifamily market in the year ahead. While there is some initial interest from
North American investors, we expect European investors to comprise the majority
of foreign investment.
What is the immediate outlook for the market?
Pricing in Finland’s major multifamily hubs is likely to remain stable over the
coming year or two following a period of significant yield compression. With yields
at a record low, it seems that investors, both domestic and foreign with existing
exposure, will look at secondary locations in order to meet their return criteria. We
may see some slight compression in these markets, but our general view is that
pricing here is likely to remain in line with current levels.
We expect a moderate increase in activity during 2019 as there is sufficient supply
coming to the market. Multiple portfolios above the €100m threshold are expected
to transact in 2019 so this will boost overall volumes.
What significant changes do you expect to see?
We expect new residential products, like micro-living assets, to account for
a greater share of activity in the years ahead. Demand for well-located, well
designed and comparatively cheaper units will be strong, despite a lack of
available product currently.
13European Multifamily Investment | Market Update | 2019
France
SNCF portfolio sale drives aggregate volumes in France
Source of investment Total investment volumes reached €4.3 billion in 2018, an
increase of nearly 50% from 2017. 2018 represented a record
breaking year for multifamily investment in France, with
11.2% volumes well above the long-term average of €2.24bn.
While volumes for Paris and the wider Île-de-France region
continued to be the greatest recipients of capital (73%), this
share was significantly below the 90% share of investment
88.8% that has occurred in the previous two years. Nationwide
portfolios commanded a greater share of activity compared
to previous years. This was primarily the result of the SNCF
portfolio that was acquired at the end of the year. The deal
represented an 80% share of the SPV Foncière Vesta. The
portfolio consists of 130 properties representing 4,000
housing units, from ICF Novedis, a subsidiary of SNCF Group,
of which approximately half are in the Greater Paris region.
■ Domestic ■ Foreign
This acquisition represented the largest single deal in the
past decade in France and was acquired by a consortium
of French and international investors that included ERAFP,
IRCANTEC, CDC Habitat, Swiss Life and Vonovia.
The SNCF portfolio represented the only deal above €100m
in the market last year, with STAM Europe and Allianz’s
Investment Growth acquisitions of two opportunities in Paris, for a total of
volumes in volumes €98.5m and €82m respectively, the other two large deals
recorded in 2018. This signified a substantial drop off in large
€4.3bn 50% ticket activity when compared with 2017, in which five above
that threshold transacted.
Bi-annual investment volumes (€mn) International capital became more active in 2018, with
Aberdeen Standard making its maiden investment in the
3,000 multifamily market in France. This alongside Vonovia’s share
ensured that total international volumes reached a record
2,500 total of €480mn. Domestic capital also saw strong growth in
absolute activity (44%). Institutional investors became the
2,000 most active segment of domestic investors in the French
market. Social landlords also remained extremely active,
1,500
particularly in the forward funding segment of the market.
1,000
500
0
H1 H2 H1 H2 H1 H2 H1 H2 H1 H2
2014 2015 2016 2017 2018
14Spotlight on France
Our expectations
Christophe Volle
Director – Residential Investment, France
Volumes: Yields:
Slight decline Stable
What is your keyword for the market in the short term?
Lively
Why?
The SNCF portfolio sale highlights the improving maturity of the multifamily
market in France. Not only does it illustrate investors’ ability to acquire at scale,
it also demonstrates that the structure of the deal provides greater opportunity
for private institutional investment – particularly for international investors.
This transaction also highlights greater flexibility in deal structures for
would-be vendors with significant holdings in multifamily.
What is the immediate outlook for the market?
The outlook for the multifamily investment market in France remains positive.
Volumes are expected to see a slight decline when compared to 2018’s
record total but volumes are still anticipated to remain above the long-term
average. There are currently a few large ticket portfolios on the market that
will boost aggregate figures but there is also greater appetite from investors
for development deals. Many of these opportunities are focused around
redevelopment or regeneration locations that are tied to both the Olympics
and the Grand Paris project. This interest will be principally focused around
new stations or areas that see the greatest increase in connectivity.
International capital was particularly active in 2018 with a number of large
institutions making their first investment in the multifamily market. There is
clearly continued appetite from these investors to build out their residential
portfolios here in France and we expect them to to remain active.
Investment activity is likely to be focused on core markets such as Greater Paris
and in regional locations such as Lyon, Marseille and the Atlantic Arc.
What significant changes do you expect to see?
Other multifamily sub-sectors are expected to grow in popularity. Senior
housing is likely to see the greatest uptick in activity, with investors increasingly
comfortable with operating models in the market. However, there are questions
regarding whether supply can meet investor demand. Total investment activity
in student housing is expected to grow significantly, with a number of assets and
platforms likely to change hands towards the end of the year.
15European Multifamily Investment | Market Update | 2019
Germany
Europe’s largest multifamily investment market sees
strong growth in total volumes
Source of investment The transaction volume for residential properties and
portfolios reached €18.6bn in 2018, which was 38% above
23% aggregate volumes in 2017 and 10% above the five-year
average of €16.9 billion. This represented the 3rd largest year of
total investment in Germany, with higher transaction volumes
only previously having been achieved in 2005 (€19.8 billion)
and 2015 (€25.2 billion). The strong performance was despite
77% more onerous regulations introduced that put additional
downward pressure on investment strategies.
Apart from the largest transaction of the year, Vonovia’s
acquisition of Buwog and circa 27,000 German units for
approximately €2.9 billion including liabilities, only three other
portfolios with more than 4,000 residential units changed
hands. More than 90% of the transactions involved fewer than
800 residential units and generated close to €10 billion overall.
■ Domestic ■ Foreign
In this respect it is also necessary to concentrate more and
more on small individual transactions that hold their value.
Pension and special funds are active in this segment. Last
year, they primarily focused on medium-sized and small
transactions, and together with public housing associations,
were able to claim positions 2-4 (€4.9 billion overall) in terms
Investment Growth of asset generation. Vonovia’s acquisition of Buwog alone
volumes in volumes ensured that listed housing companies remained the most
active in the market, investing a net amount of €3.6 billion.
€18.6bn 38%
Berlin continues to geographically dominate the market
despite increased sales of nationwide multi-location portfolios
Bi-annual investment volumes (€mn) and heightened M&A activity. The multifamily investment
market became increasingly dominated by national investors.
20,000 Less than a quarter of the capital came from overseas, with
Danish pension fund PFA and investments by British and U.S.
investors amounting to a combined €2.2 billion. While this
15,000 means that relative levels of foreign activity declined in 2018, it
remained broadly in line with the average for the last five years.
10,000
5,000
0
H1 H2 H1 H2 H1 H2 H1 H2 H1 H2
2014 2015 2016 2017 2018
16Spotlight on Germany
Our expectations
Konstantin Kortmann
Head of Residential Investment, Germany
Volumes: Yields:
Slight decline Stable
What is your keyword for the market in the short term?
Pressure.
Why?
This applies to multiple trends in the market. Tenant demand for rental properties
remains extremely high and the current level of delivery ensures that a chronic
undersupply of properties persists. There is also heightened political pressure, at both
a national and administrative level, which is clouding the market with uncertainty.
The Berlin city government has now agreed on the outline of a draft bill which would
introduce a 5-year rent freeze, starting in 2020 but retrospectively applied to June 2019.
The proposal has the aim to freeze rent for all 1.5m open-market rental apartments but
exclude social housing and new-builds. There is, however, uncertainty about the main
contents and mechanisms of the regulation, while there has been debate over whether
the introduction of such a freeze would be constitutional.
This prolonged period of debate has generated uncertainty for investors, who have
become cautious with their investment strategies in the city. If they are unable
to assume future rental growth, which is a key component of current investment
models, it could dampen investment volumes into the sector and shift investor
attention toward build for sale models.
What is the immediate outlook for the market?
Given the heightened activity that occurred during 2018 we are anticipating that
volumes will fall slightly in the year ahead. Even if developers, municipal housing
companies and large housing companies built more new housing, it is unlikely that
the overall transaction volume will match last year’s total. Sustained price growth
and the tendency to invest more in special segments such as micro apartments
will not fundamentally change that. A transaction volume in line with the five-year
average of about €17 billion should be achievable.
Current prime yields of 2.7% in the Big 7 are also better than low-risk government
bonds for these conservative investors that invest for the long term. Investments
with initial yields of well below 3% could also be a good asset due to the expected
long-term rental growth in properties that are currently let below the market price.
What significant changes do you expect to see?
Continued political pressure is likely to be the key trend in the short term at least.
Exerting pre-emptive purchase rights in major markets such as Munich, Berlin and
Hamburg are likely to have significant knock on effects for multifamily investment,
if implemented. Considering re-purchase of stock, and extending “socially
protected areas” in major cities across the country also potential changes that
investors should be wary of.
17European Multifamily Investment | Market Update | 2019
Ireland
Dublin continues to dominate activity
but regional volumes on the rise
Source of investment Residential investment volumes reached €1 billion in 2018,
representing a 40% annual increase in total volumes (€710m).
70% This growth in total activity was spurred by the acquisition of
four large ticket opportunities (>€100m) by both foreign and
domestic investors in Dublin.
Although Dublin (€840m) continued to dominate the
institutional investment market, multiple transactions were
30% also recorded in cities such as Cork and Limerick. Dublin
has dominated the total share of investment activity since
market inception in 2012, ranging from 85% to 91% per
annum. Outside of Dublin, the province of Munster was the
dominant market with 15% of the total volumes in 2018.
This represents the record for multifamily investment outside
of the Irish Capital. The largest non-Dublin deal was the sale
of The Elysian development, a PRS scheme in Cork, which
■ Domestic ■ Foreign
was purchased by Kennedy Wilson for €90 million. Another
non-Dublin deal of note is City Square in Cork which was a
receivership sale and was purchased by a private UK fund
for €33m.
Foreign investors continued to dominate the market in
2018 (70%), despite the emergence of several new domestic
Investment Growth investors throughout the year. The share of foreign investment
volumes in volumes was dominated by large institutional funds. Kennedy Wilson,
Tristan Capital Partners, Patrizia and Round Hill Capital
€1bn 40% remained active in the market, further scaling out their existing
exposure to the Irish multifamily market. New foreign entrants
such as LRC Group, Greystar, Starwood and heightened
Bi-annual investment volumes (€mn) activity from domestic investors such as IRES, Irish Life and
Carysfort Capital, added to the total pool of investors targeting
800 multifamily in Ireland.
700
600
500
400
300
200
100
0
H1 H2 H1 H2 H1 H2 H1 H2 H1 H2
2014 2015 2016 2017 2018
18Spotlight on Ireland
Our expectations
Conor O’Gallagher
Senior Director,
Head of Residential, Ireland
Volumes: Yields:
Significant Increase Slight decline
What is your keyword for the market in the short term?
Opportunity
Why?
Demand for purpose built rental accommodation remains extremely high
in Dublin with interest beginning to focus on the other cities across Ireland.
Limited supply of both owner-occupier and rental dwellings ensures that
imbalance between supply and demand will continue unabated in the short
term. This severe undersupply provides investors with a significant opportunity
to drive returns, with the market not as keenly priced as other major cities
across Europe. Competition for multifamily assets is extremely high and
remains the key barrier to entry for most investors looking at this space.
Interest is broad, across a range of investor types, with domestic pension funds,
UK, US and German Funds, plus a plethora of overseas and domestic private
funds all active within this sector.
What is the immediate outlook for the market?
Looking ahead, multifamily investment demand will broaden, with more
activity in the regions. We expect to see continued solid interest in any good
quality, well-located multifamily assets across 2019, with greatest focus on
Dublin. Assuming that the supply becomes available it will be met by significant
investor demand and pricing. Multifamily will also continue to perform strongly
as there is no quick solution to the issues in the Irish housing market, so the
fundamentals are there to continue to support investor interest. Assets for sale
in the next few months will test the market, and prime multifamily yields may
even drop sub-4% in 2019. Average yields are expected to compress further as
demand outweighs supply.
What significant changes do you expect to see?
We are seeing new entrants in the market and expect to see more in 2019. There
is currently approximately €8 billion of capital looking to get into multifamily but
volumes will be dictated by low levels of supply. We are seeing investor interest
for wholly owned multifamily, with a preference for forward purchases. This is
where investors are seeing the best opportunity to generate value.
19European Multifamily Investment | Market Update | 2019
Netherlands
The growth of portfolio deals boosts total investment
activity in 2018
Source of investment The institutional multifamily investment market continued
its strong rally in the final quarter of 2018, with the year-
end transaction volume totalling over € 5.6 billion. This
represents a 35% increase from last year’s total as demand
from both national and international investors remains high.
The rise of multi-location portfolio acquisitions significantly
boosted total activity, with just under €4.2bn of total
52% volumes attributed to nationwide portfolios. Vesteda
Groep’s acquisition of 6,979 units represented the largest
48% deal of 2018 – transacting for €1.5bn from previous owners
NNIP. Over 50% of total portfolio acquisitions originated
from domestic purchasers, the remaining share of foreign
acquisitions were largely made up by CBRE GI, Deutsche
Bank and Round Hill Capital.
■ Domestic ■ Foreign Unsurprisingly, the Randstad region was the next greatest
source of activity (€690m), with Amsterdam accounting for
around 65% of that amount. This is a significant fall from
2017 volumes (€1.6bn) and highlights the lack of available
product, particularly in turnkey projects or recently
developed assets. Pricing in the Randstad has remained
resilient following several years of compression. It seems
Investment Growth unlikely that yields in these locations will remain stable over
volumes in volumes the coming year given the volume of capital chasing a small,
finite number of opportunities.
€5.6bn 35%
Levels of foreign investment grew significantly, with the share
of international capital rising from 29% in 2017 to 48% in
Bi-annual investment volumes (€mn) 2018. In absolute terms, this represented an increase of 120%
over the past year. While there have been a number of new
3,000 international investors in this space, foreign investors with
existing assets in the Netherlands accounted for the greatest
2,500 share of activity. Heitman, Orange Capital Partners, CAPREIT
and Aedifica were active on multiple fronts and continued to
2,000 drive scale in their multifamily portfolios.
1,500
1,000
500
0
H1 H2 H1 H2 H1 H2 H1 H2 H1 H2
2014 2015 2016 2017 2018
20Spotlight on Netherlands
Our expectations
Jorn Thoomes
Head of Investments, Netherlands
Volumes: Yields:
Slight decline Stable
What is your keyword for the market in the short term?
Yield spread
Why?
In the last 12 months, we have seen a moderate increase in the pricing
spread between core and peripheral locations. Prices for prime assets in core
locations have remained stable over the last year. Current yields are at a historic
low and leave limited room for further inward shifts. Meanwhile there have
been some outward movements, in sentiment at least, in secondary locations.
As we expect major core locations to receive the greatest investor appetite
in the short term, it is likely that this spread between primary and secondary
locations will be maintained or perhaps even grow.
What is the immediate outlook for the market?
The outlook for the multifamily market in the Netherlands remains extremely
positive. The investment market will continue to witness high levels of demand
from both domestic and international investors. Investment volumes are
expected to once more be high, although it is not expected that the record
total in 2018 will be replicated in 2019. This stems primarily from limitations on
the supply side – with several large-scale portfolios trading in recent years and
development activity expected to cool.
We are also starting to see signs of wider interest in multifamily, both in terms of
typology of investor but also source of capital. As headwinds in the Commercial
market continue unabated, many investors are looking at diversification
options. Multifamily features high on that list of priorities, especially with
investors who are considered relatively late movers.
International capital remains active in the Netherlands, with last year’s
share of activity representing a record total for cross-border activity. Whilst
European and North American investors are responsible for the majority of this
investment, there are signs that investors from further afield may begin to enter
the market during the coming year or two.
What significant changes do you expect to see?
We expect a slowdown in overall housing delivery both in the multifamily
market and owner-occupier market in the short term. Legislative change,
higher construction costs and a lack of suitable land sites are all expected to
limit residential supply.
21European Multifamily Investment | Market Update | 2019
Poland
Volumes remain broadly in line with historic levels
Source of investment Residential investment volumes totalled €130 million in
2018, representing a 16% decrease in activity year-on-year.
Volumes on the emergent multifamily transaction market
remained relatively stable though, oscillating between
€120-160mn per annum over the past four years. Although
we expect the market to grow further, there are a few causes
for concern in the multifamily market in Poland, primarily
100% currency risks and investment financing. As rental income
streams are principally in local currency, international
investors face the question of whether to hedge the currency
exposure of their investments. With the first loans being
granted, lenders are expected to grow more comfortable
lending on multifamily and student housing schemes.
Following the initial and pioneering investments of domestic
player FMNW or Rental Housing Fund (Fundusz Mieszkań
■ Domestic ■ Foreign
na Wynajem) which is owned by the Polish state bank
BGK, the first international investors entered the Polish
market in 2016. With approximately 2,500 units, FMnW still
has the largest running portfolio on the market. Yet it is
investors from abroad that are currently the most active in
the multifamily sector. In 2018 the Resi4Rent platform was
the major market actor, alone responsible for over 60% of
Investment Slight decline nationwide transaction volumes. Prague domiciled Zeitgeist
volumes in volumes AM continued its activities with investments in Warsaw and
regional cities. Israeli investor Aurec Capital made its first
€130m (-16%) investment in Warsaw in Q4 2018.
Despite strong yield compression, investors remained
Bi-annual investment volumes (€mn) focused on the Polish Capital, with Warsaw accounting for
57% of investment volumes in 2018. This represents a slight
200 increase on the historical average of 52% over the past four
years. There do however remain several strong regional
markets including Wroclaw, Gdansk, Krakow, Poznan and
150
Lodz, which have experienced less yield compression in
the last few years. This accommodates investor demand
100 for higher yielding assets outside of Warsaw, and interest in
these geographies is on the increase. This is particularly true
for investors already invested in the capital.
50
NA NA NA NA
0
H1 H2 H1 H2 H1 H2 H1 H2
2015 2016 2017 2018
22Spotlight on Poland
Our expectations
Maximilian Mendel
Head of Residential Investment, Poland
Volumes: Yields:
Slight increase Slight decline
What is your keyword for the market in the short term?
Building pipelines
Why?
Forward deals remain the main way to enter the market for new investors given
the lack of standing stock for investors to acquire. Most investors with scale are
still yet to build up their entire pipeline, given that a significant portion is either
under development, with planning or still in the process of gaining approval.
Therefore, it is necessary for new entrants to build up rental portfolios by
securing development projects. This is particularly difficult given the high
demand for new build private sales. Also both land and construction costs have
risen significantly over the past two to three years.
As investors aim to scale-up quickly, they must implement significant
development pipelines – sometimes with a strategic partner or sometimes with
different developers. We have seen a number of investors attempt to bring in
in-house development capacities to build up this pipeline, but this still remains
a small segment of the entire market.
What is the immediate outlook for the market?
Volumes in the sector are expected to see strong growth in the year ahead as a
number of development opportunities in Warsaw, Krakow and regional cities
come to market. Incumbent investors are expected to remain the most active
given their ability to be aggressive in asset underwriting processes.
With BGKN not currently active in the multifamily sector, the institutional
market in Poland is almost exclusively in the hands of foreign capital. This is
expected to continue in the near term as a wider pool of demand looks to enter
the market for the first time. The enlarged demand pool is derived primarily
from European and North American investors, with investors from Germany
seemingly the most vocal.
What significant changes do you expect to see?
It’s clear that multifamily investors that are currently active in Poland are also
looking at other sub-sectors of the Living spectrum. This is particularly true
in the case of student housing, with most student housing players starting to
build up portfolios through development or property redevelopment. Coliving
has also become a hot topic over the past 12 months, with a number of early
movers in Europe actively targeting and openly allocating a segment of their
funds towards Poland’s largest cities.
23European Multifamily Investment | Market Update | 2019
Spain
Multifamily investment in Spain reached
a record total in 2018
Source of investment The multifamily investment market in Spain continued its
trajectory of growth in 2018, with aggregate volumes reaching
€4.4bn. The growth in activity represented an increase of over
70% in year-on-year volumes and a record year of investment
for the residential market in Spain.
This growth in volumes was fuelled principally by heightened
M&A activity and nationwide portfolio sales that totalled €2.6
47% billion in 2018. Blackstone acquired multiple tranches of shares
from Santander in the Socimi Testa Residencial portfolio for
53% over €1.1bn. The private equity investor now controls just
over 80% of the entity’s shares. Oaktree and Vivenio were also
active in acquiring multi-location portfolios of development
and income producing assets respectively.
Levels of investment in Madrid (€1.1bn) remained broadly
■ Domestic ■ Foreign stable despite a relatively small decline in activity. Given the
considerable activity of recent years and the continued land
banking by housebuilders, there is now a scarcity of income
producing or development opportunities in Madrid and
Barcelona. Yields in both markets have seen considerable
compression (25bps) over the past year. Investors instead
became more active in alternative locations that share similar
Investment Growth markets characteristics to the two largest Spanish cities, in the
volumes in volumes search for greater opportunities. Catella acquired 3 residential
assets in Pamplona, a notable example of a much wider trend
€4.4bn 70% towards regional cities.
International investment in the multifamily market has
Bi-annual investment volumes (€mn) become increasingly international. Absolute volumes doubled
over 2018 to total just over €2.3 billion and the relative share of
4,000 investment increased from 42% to 53%. A notable trend is that
although capital from North America has become increasingly
active, there is a much greater diversity in where these
3,000 investors originate. Investors from France, Sweden and the UK
became more active over 2018, alongside investors from Latin
2,000
American countries.
1,000
0
H1 H2 H1 H2 H1 H2 H1 H2 H1 H2
2014 2015 2016 2017 2018
24Spotlight on Spain
Our expectations
Nick Wride
Head of Living & Alternatives, Spain
Volumes: Yields:
Stable Slight decline
What is your keyword for the market in the short term?
Purpose-built
Why?
Whilst multifamily volumes in Spain reached a recent high in 2018, the
proportion of purpose-built activity remained low. Most of total investment
volumes was derived from corporate transactions and platform deals as this
is often the easiest route to market. Outside of social housing developments,
there has been little purpose-built rental stock that has traded in Spain.
But looking ahead, Spain will be characterised by a clear move towards purpose-
built product given the strong demand from investors for this type of multifamily
asset. Developers with significant land banks are now starting to construct
build to rent products on a speculative basis, with turnkey projects and forward
funding structures proving popular with investors. Madrid, Barcelona and
Valencia are likely to see the greatest share of this development, with Bilbao and
Seville also likely to see a few schemes come through but to a lesser extent.
What is the immediate outlook for the market?
We expect greater diversity in the typology of investors that will be active in
acquiring Spanish multifamily assets given the wider ranging type of multifamily
products coming to market. With investor preference for core products now
becoming more evident, a more complete spectrum of investors are likely to
be active in the market. Joint ventures will continue to comprise a significant
share of transaction activity, with local market development expertise backed by
foreign institutional capital from Europe and North America.
A lack of large-scale platform activity is likely to see investment volumes remain
broadly in line with last year’s total. Due to heightened development activity,
we expect land and forward deals to grow significantly in absolute terms and
account for a greater share of investment volumes in the year ahead.
What significant changes do you expect to see?
Pricing in the major markets has seen strong compression over the last few
years and we believe that this is set to continue in prime locations in both
Madrid and Barcelona. A significant overweight of capital has emerged and
is chasing a relatively limited level of supply. Well-located opportunities that
come on to the market are expected to be met by strong demand that could
see pricing move inwards by up to 25bps in 2019.
25European Multifamily Investment | Market Update | 2019
Sweden
Volumes remain high despite a slowdown in forward deals
Source of investment Residential investment volumes totalled €5.1 billion in 2018,
representing a 9% decrease in total investment activity.
Despite a slight decline in total investment, activity in
Sweden remained high against expectations, given the
record performances in 2016 and 2017 and the lack of
purpose-built product coming to market. Volumes remained
broadly line with the 5-year average and well above the 10-
61% year average for multifamily investment in Sweden.
Vonovia’s purchase of Victoria Park (€1.6bn) was the largest
39% transaction of 2018 and shifted the balance of investor activity
heavily towards foreign investors (39%). The German listed
entity is now in control of approximately 81.4% of the shares
and 81.1% of the votes in Victoria Park. Victoria Park holds
approximately 14,000 apartments across Sweden, with assets
concentrated in Linköping, Stockholm municipality, the wider
■ Domestic ■ Foreign
Stockholm County, Malmö and Gothenburg. Just under 70% of
units are not refurbished and so provide high potential to drive
rents. Victoria Park also has access to significant land holdings
alongside current assets, with an estimated pipeline of c.3,000
apartments at the end of Q4 2018.
Multi-location portfolios and M&A activity accounted for just
Investment Slight decline over 50% of total investment volumes. While M&A activity
volumes in volumes has been solely cross-border, larger portfolios have been
the preserve of the domestic investor. Listed and private
€5.1bn (-9%) domestic real estate funds were particularly active in the
portfolio segment of the market, acquiring a total of €1.1
billion residential assets. The largest transaction saw Akelius
Bi-annual investment volumes (€mn) dispose a large portfolio of approximately 2,400 apartments
in suburban Stockholm and Gothenburg. The purchaser was
5,000 Victoria Park (Vonovia). Akelius hearby continues with this
strategy to sell properties in C-locations with an ambition
4,000 to focus on acquiring properties in central locations in
Stockholm and Malmö. Total activity in these locations
3,000 accounted for just under 10% of activity, a significant fall
from 2017’s levels.
2,000
1,000
0
H1 H2 H1 H2 H1 H2 H1 H2 H1 H2
2014 2015 2016 2017 2018
26Spotlight on Sweden
Our expectations
Filip Skoldefors
Director, Capital Markets, Sweden
Volumes: Yields:
Slight decline Stable
What is your keyword for the market in the short term?
Development subsidies
Why?
Market activity has suffered since a contraction in building right transactions
over the past 12 to 18 months. This was before the recent national budget
that removed a subsidy for building rental properties, where rent levels were
capped and pre-determined by legislators.
With a new Government formed, it is likely that the subsidy will be
reintroduced. Despite this political merry-go-round, the reintroduction of the
subsidy is expected to have a positive impact on production numbers. Smaller
cities in the regions and suburbs/commuter locations around the largest cities
in Sweden are likely to be the greatest net beneficiaries of the implementation.
What is the immediate outlook for the market?
Demand for multifamily investment is expected to remain high in the short
term, with total activity likely to fall in line with the longer-term average
volumes. Increased urbanisation, high immigration and a strong, resilient
economy are all factors that are currently attracting investment to the market
but a lack of opportunities is a significant hinderance to growth.
Given Vonovia’s acquisition of Victoria Park in 2018, we expect foreign volumes
of investment to drop off slightly despite the clear interest from a broad group
of international investors. Most cross-border activity is likely to continue
originating from other Nordic countries but there has been a noticeable shift
towards interest from other European and international investors looking to
acquire assets in Sweden. This is best illustrated by Barings recent acquisition of
6 residential developments in the wider Stockholm area, which represented the
largest forward deal funded by a foreign investor in recent times. Another example
of the increased interest from international investors is Aberdeen Standard’s recent
c. €115 million acquisition of a new build PRS portfolio in the Stockholm area.
What significant changes do you expect to see?
Given market timing and the reintroduction of development subsidies, we
expect investment activity in the more affordable, regulated sector of the
market to grow. Other asset types will remain popular but are unlikely to
comprise a significant share of deals brought to market.
We also expect more operational Living sectors to cautiously grow in the
medium to longer term. These sub-sectors are still immature without meaningful
transactions, but are likely to grow in popularity as a result of the acute supply
shortage in these sub-sectors and demand from international investors.
27European Multifamily Investment | Market Update | 2019
United Kingdom
Breakthrough year for the multifamily market in the UK
Source of investment Residential investment in the UK has had a breakthrough
year, at least in the European context. Total investment
volumes surged by over 150% compared with 2017 to €6.7
billion, off the back of 50 deals. This is despite the c£2.25bn+
Lonestar deal at Wembley falling through and is a signal of
how far this market has progressed in 5 short years.
Absolute volumes in London grew by over 75%, despite its
68% share of activity falling from just over 40% to 30%. Regional
activity increased significantly, with Manchester (€715m),
32% Leeds (€400m) and Birmingham (€330m) being the greatest
beneficiaries of this trend. Further, the geographical spread
of assets under construction, in development or in pipeline
is now broadly equal between London and the rest of the
UK, a demonstration of the growing confidence in the UK
multifamily sector. Multilocation deals, whether forward
■ Domestic ■ Foreign
funding or income producing, totalled a record €1.6 billion
in 2018. This signifies a clear breakaway with previous
years, as the total quantum of purpose built, institutionally
owned rental assets has now begun to reach a level that
provides investors with larger platform opportunities.
Oxford Properties and Get Living’s deal is a key example
of this and highlights the continued interest from North
Investment Growth American investors in the multifamily market in the UK.
volumes in volumes North American activity totalled €1.8 billion in 2018 and
represented almost 90% of foreign activity in the year.
€6.7bn 150%
2018 also represented a significant shift towards domestic
investment in the UK, with the relative share rising from
Bi-annual investment volumes (€mn) 46% to 68%. In absolute terms this represented an increase
of nearly 300% as Grainger, L&G and M&G were among
5,000 the most active domestic entities. Whilst the market has
historically been dominated by international private funds,
4,000 domestic institutions have sought to scale their multifamily
exposure in the UK.
3,000
2,000
1,000
0
H1 H2 H1 H2 H1 H2 H1 H2 H1 H2
2014 2015 2016 2017 2018
28You can also read
